CESTAT Chennai Upholds Customs Duty Demand on Target Plus Scheme Imports While Setting Aside Section 112 Penalties for Procedural Defect
1. Background and Origin of the Dispute
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal adjudicated a cluster of connected appeals stemming from a single adjudication order — Order in Original No. 24475/2014 dated 28.2.2014 — passed by the Commissioner of Customs (Seaport – Export), Chennai. Since all appeals arose from that common order, they were heard together and disposed of through a consolidated ruling.
The controversy centred on imports of coated paper and paperboard by M/s J.P. Enterprises, a firm that held five non-transferable Target Plus Scheme licences issued to it as a merchant exporter. Between October 2006 and January 2009, six consignments were cleared through Haldia Port and thirteen through Chennai Port, all purportedly under duty exemption granted by Notification No. 32/2005-Cus. dated 08.04.2005. The Directorate of Revenue Intelligence alleged that the goods were never genuinely used in accordance with the actual-user condition embedded in those licences, and instead found their way into the open market, thereby resulting in evasion of customs duty.
The Commissioner confirmed the duty demand along with interest, imposed an equal penalty under Section 114A of the Customs Act, 1962, and levied separate penalties on Shri Sushanta Kumar Chaudhuri and Shri Amit Kumar Jain under Section 112(b). All the aggrieved parties filed appeals before CESTAT Chennai, giving rise to the present proceedings: Amit Kumar Jain Vs Commissioner of Customs (CESTAT Chennai), Customs Appeal No. 41299/2014, decided on 18.03.2026.
2. The Exemption Notification and Its Conditions
The Tribunal extracted and relied upon the operative portion of the applicable exemption notification:
"Notification No. 32/2005-Cus Dated 08-04-2005 Exemption on goods imported into India against a Duty Credit Certificate issued under the Target Plus Scheme.- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts, —…… goods when imported into India against a duty credit certificate issued under the Target Plus Scheme in accordance with paragraph 3.7 of the Foreign Trade Policy (hereinafter referred to as the said certificate) from, — (a) the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act 1975 (51 of 1975); and (b) the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act,— subject to the following conditions, namely:— ….. (3) that the said certificate and goods imported against it shall not be transferred or sold: Provided that where the goods are imported by a merchant exporter having supporting manufacturer(s) whose name and address is specified on the said certificate, the said goods may be utilised by the said supporting manufacturer(s);…"
The Foreign Trade Policy 2004–2009 defined the relevant terms. Chapter 9 stipulated the following:
9.4 "Actual User" means an actual user who may be either industrial or non-industrial.
9.5 "Actual User (Industrial)" means a person who utilises imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit.
9.6 "Actual User (Non-Industrial)" means a person who utilises the imported goods for his own use in (i) any commercial establishment carrying on any business, trade or profession; or (ii) any laboratory, Scientific or Research and Development (R&D) institution, university or other educational institution or hospital; or (iii) any service industry.
9.61 "Supporting Manufacturer" means any person who manufactures any product or part / accessories / components of that product. Name of supporting manufacturer as well as the exporter must be endorsed on export documents.
The Tribunal read these provisions alongside the well-settled principle, affirmed by the Constitution Bench of the Supreme Court in Commissioner of Customs (Import) Vs Dilip Kumar and Company & Ors., AIR 2018 SC 3606, that the burden of proving eligibility for an exemption lies squarely on the assessee seeking to avail it. Taxation is the rule; exemption is the exception, and it must be strictly construed.
3. Preliminary Observation: Excessive Citation of Authorities
Before addressing the merits, the Tribunal took note of the appellants' practice of citing an unusually large number of judicial decisions in their written submissions without explaining the ratio of each or demonstrating how it applied to the facts in hand. The Bench had occasion to address the same issue recently in Panasonic Home Appliances India Co. Ltd. Vs Commissioner of GST & Central Excise, Final Order Nos. 40339–40341/2026 dated 10.03.2026 – CESTAT Chennai], where it quoted the Supreme Court's observation in Rashmi Metaliks Ltd. Vs Kolkata Metropolitan Development Authority, (2013) 10 SCC 95:
"6… The sheer plethora of precedents makes it essential that this Court should abjure from discussing each and every decision which has dealt with a similar question of law. Failure to follow this discipline and regimen inexorably leads to prolixity in judgments which invariably is a consequence of lengthy arguments. 7. It is a capital exhaustion of Court time, lack of which has become critical…"
The Tribunal also recalled the earlier Supreme Court caution in Kanwar Natwar Singh Vs Directorate of Enforcement & Anr., (2010) 13 SCC 255:
"38. Before parting with the judgment, we are constrained to observe with some reluctance about the recent practice and procedure of including list of authorities in the compilation without the leave of the Court. In many a case, even the senior counsel may not be aware of inclusion of such authorities in the compilation. In our considered opinion, this Court is not required to consider such decisions which are included in the compilation which were not cited at the Bar."
These observations carry special contemporary relevance in an era where, as the Tribunal pointedly noted, the Supreme Court has expressed concern about pleadings generated through artificial intelligence that cite non-existent judicial decisions.